The stimulus lie

February 05, 2002|By Steve Chapman

CHICAGO - The story is told of a prosperous obstetrician who is having lunch with some colleagues when he looks at his watch and abruptly announces that he has to get to the hospital for a delivery. "Is it a Caesarean?" asks one of his friends. He replies, with a smile, "Only if I get there in time."

Physicians occasionally like to pretend that their services are needed when they really aren't, and politicians are no different.

The president and Congress are urging the swift passage of a fiscal stimulus bill to assist the economy, each accusing the other of risky methods and unconscionable stalling.

Meanwhile, by some miracle, a recovery appears to be materializing without their help: On Wednesday, we learned that the economy grew by 0.2 percent in the fourth quarter, which means that the recession is officially over.

If the expansion continues, of course, Congress and the president will have trouble claiming credit for the turnaround.

War is supposed to dictate austerity. But Democrats and Republicans, under the guise of fiscal stimulus, insist that now is the perfect time for Washington to shower voters with goodies that the government can't pay for.

In recent years, they have exercised modest restraint to avoid being seen as recklessly squandering the budget surplus.

That restraint pretty much vanished on Sept. 11, which furnished the perfect excuse to squander at will - even if it meant the return of red ink.

It does. During his State of the Union address, President Bush had a long list of priorities that demand more money, starting with the defense budget. "Whatever it costs to defend our country, we will pay it," he vowed. Oh? The reality of his budget plan is that we won't pay it - we'll leave that to future taxpayers, thank you. His spending increases and tax cuts, combined with revenues lost to the recession, mean the government will have to go back to borrowing billions to cover its obligations.

There is no doubt that fighting terrorists is costly work. Much of the money proposed for beefing up the military and improving security at home is money we can't afford not to spend. But the urgency of that need ought to dictate some second thoughts about Mr. Bush's tax cuts. Why reduce your income at a time when your expenses are soaring?

Mr. Bush's answer is that the economy needs a jolt of adrenaline. "The way out of this recession, the way to create jobs, is to grow the economy by encouraging investment in factories and equipment, and by speeding up tax relief so people have more money to spend," declared the president.

Democrats concur on the vital importance of tax cuts, though not on what kind. House Democratic Leader Richard Gephardt, in his response, called for "tax cuts that promote growth and prosperity for all Americans."

But the need to goose the private sector was dubious even when the House passed Mr. Bush's $90 billion fiscal stimulus package at the end of last year. Since then, there have been plenty of signs that the recovery is taking hold on its own. New home sales jumped in December, business inventories have been plunging and consumer confidence is rebounding. The Conference Board's Index of Leading Economic Indicators has risen for three consecutive months.

Even before the latest good news, Federal Reserve Board Chairman Alan Greenspan was unusually direct and intelligible in his comments about the supposed need for a fiscal stimulus. "I do not think it is a critically important issue to do," he told the Senate Budget Committee. "I think the economy will recover in any event."

Mr. Greenspan knows what Congress and the president would like us to forget - that budgetary policy is too slow and clumsy to be much use in alleviating economic distress.

The stimulus packages being debated in Washington, keep in mind, are a response to a downturn that began 11 months ago, and they still haven't come to pass.

Much of what the stimulus bills contain, in any case, would not put money into the economy for months or years to come. When that day finally arrives, we will be forcing large doses of expensive medicine on a healthy patient.

If Congress and the president insist on providing fiscal stimulus when it clearly isn't needed, we can assume it's just an excuse for the government to go back to living beyond its means.

Our leaders have been saying that since Sept. 11, the American people have shown a determination to win the war against terrorism no matter what the cost. Judging from the budget debate, though, they think we'll support the fight only if we don't have to pay for it.

Steve Chapman is a columnist for the Chicago Tribune, a Tribune Publishing company.